What is Cibil Score: What is CIBIL Score, how is it made, how much should it be and how to improve it? Know the important role of CIBIL Score in loan and credit card approval.
CIBIL Score: If you have ever applied for a loan or credit card, then you must have heard the name of CIBIL Score. This is a 3-number score, which tells whether you have paid your earlier loan or credit card on time or not. In simple language CIBIL Score is your credit report card. The bank finds out with the help of CIBIL score whether the loan EMI will be paid on time or not.
How is CIBIL Score made?
1. EMI and credit card payment on time
If you pay monthly EMI and credit card bill on time, it has a positive impact on your CIBIL score. For example, Pankaj deposited all the EMIs of the bike loan on time. This will strengthen his credit history and his score will also improve.
2. Late payment may reduce score
If EMI or credit card payments are repeatedly delayed or defaulted, your score will be affected. For example, if someone does not make even the minimum credit card payment for several months, his credit profile will be negatively impacted.
3. Apply for multiple loans at once
By continuously applying for loans in many banks or NBFCs in a short period of time, many Hard Inquiries are registered on the credit report. Due to this, in some cases banks estimate the risk differently.
4. How much debt is already running
The bank also checks if the loan or credit card outstanding is already very high compared to the income. In the eyes of the bank, the risk factor in giving a new loan is high.
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What should be the CIBIL Score?
- CIBIL Score ranges between 300 to 900.
- 750 or more – considered good.
- 650-749- Average category.
- Less than Rs 650 – In some cases, there may be difficulty in getting a loan or credit card or the terms may be different.
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How to improve CIBIL Score?
- Make EMI and credit card payments on time.
- Repay the remaining credit card amount on time.
- Do not apply for loan at multiple places simultaneously.
- Keep checking credit reports from time to time.
- Do not take more loan than necessary.
Can I get a loan without CIBIL score?
Yes. If a person has never taken a loan or credit card before, he will not have a credit history. In such cases, some banks and NBFCs take decisions on the basis of income, job, banking transactions and other financial documents.
Content Source: TransUnion CIBIL, Reserve Bank of India, Experian, Equifax, CRIF High Mark.